For Alibaba Group Holding chairman Jack Ma, floating his e-commerce flagship may be the most urgent business in the near term, but his long-term vision definitely goes further than that. Given his internet empire’s extensive reach in a country of 1.3 billion people, his agenda covers nothing less than becoming a major player in the nation’s cultural, entertainment and service industries.
At the moment, Alibaba is mostly business-oriented. On the other hand, Tencent Holdings’ (00700.HK) instant messaging platform QQ has more than 700 million users, which gives the internet giant a huge advantage in expanding into other mobile-based, value-added services and entertainment.
To prevent Tencent further dominating the market and expanding its influence over the internet, Alibaba has shifted its focus to upstream media content production and technology development.
The Hangzhou-based company has clinched several major deals to boost its exposure in the cultural and entertainment sectors. For example, Alibaba is taking a 20 percent stake in Youku Tudou, the nation’s largest online video portal, for US$1.22 billion, while Ma and a business partner are acquiring 20 percent of Shenzhen-listed Wasu Media Holding (000156.CN) for US$1.05 billion.
Hong Kong investors are particularly interested in Alibaba’s proposed acquisition of television and movie production firm ChinaVision Media Group (01060.HK). Alibaba said as early as January it would buy 60 percent of the Hong Kong-listed listed firm for US$805 million, but up to now, the deal has yet to secure shareholders’ approval.
In an unexpected twist, local media reported Monday that ChinaVision chairman Dong Ping has established a company called Alibaba Film Group in Hong Kong with ChinaVision’s management as the new firm’s directors. That could be Alibaba’s flagship in the movie and entertainment industry.
Alibaba would be better off tapping business opportunities in the upstream media content production sector, rather than spending lots of capital trying to challenge Tencent’s dominant position in the internet. Ma can then use his movie production business to boost transactions on Alibaba’s TMall and Taobao e-commerce platforms.
In South Korea, popular TV drama shows generate about 70 to 80 percent of revenue from sales of merchandise such as stationery, souvenirs and other artist-related products, while only 20 percent comes from copyright licensing. That could give Alibaba some idea on how to implement its online-to-offline strategy.
Alibaba also plans to be a leader in service industries that are closely linked to the people’s daily life. Banking and media are just two sectors that could be a part of Alibaba’s plans, and investors should expect more deals to come in the future.
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